Stocks are lower this morning as credit spreads widen in Europe. Bonds and MBS are up.

The week after the jobs report is usually data-light and this week is no exception. We have no data this morning, and about the only report of consequence is the JOLTs job opening report tomorrow. All eyes will be on the quits rate, which has been pretty steady. An increase would signal wage inflation ahead.

Goldman strategists are beginning to re-think their initial bullishness on the Trump administration. Instead of tackling things like tax reform, he is spending his energy on immigration and trade. There is a realization that gridlock is going to be the norm for the next two years, and that means no big, sweeping changes. Regulatory relief is still possible, but bureaucrats seem to be preparing to push back against major changes in direction. So the “Trump effect” could end up being a lot smaller than investors (and the Fed) were thinking a month ago. Which means the Fed has more room to be cautious.

MBS investors are beginning to worry about what happens to MBS when the Fed stops re-investing maturing proceeds from its QE portfolio. After all, the Fed has been the biggest buyer of MBS paper. Will the lower demand for mortgage backed securities translate into higher mortgage rates, even if the 10 year goes nowhere? It is possible, however take a look at the chart below: I plotted the 10 year yield and the 30 year mortgage rate, with the difference between the two (the spread) below. The two blue shaded regions were QE1, 2 and 3. The green line didn’t really move all that much during QE. MBS spreads are about where they were prior to QE. Since the Fed isn’t entertaining selling bonds, just not buying them anymore, the pre-QE level of something like 167 basis points is about right. Right now, the spread is 177 basis points, which probably represents some of the lag you see in mortgage rates versus Treasuries. My point is that MBS spreads vary over time, but they have historically been around these levels. I can’t see MBS spreads making or breaking a homebuying decision. They just aren’t that significant.

On Friday, Donald Trump signed an executive order which directed a review of Dodd-Frank. There were the expected breathless headlines in the business press (with a stroke of a pen, Donald Trump eliminates Dodd-Frank, he’s “gutting” Dodd-Frank), however this is just a “review and report back to me” order. A full repeal of Dodd-Frank would be impossible, and probably would not be supported by the industry: after all, they have spent the past 6 years getting compliant with D-F and the last thing they want to do is have to adopt some new system. The unintended consequences will be addressed, but the structure will probably remain in place. These will turn out to be addressing the CFPB and small banking regulation in order to get credit flowing for smaller borrowers, addressing the Volcker rule to encourage market making, and the fiduciary rule, which many financial advisors interpret as a gag order and a limitation of the investment options menu. What does this mean for the mortgage business? Probably not much, although the biggest potential is in an easing of CFPB enforcement and an increase in mortgage products as the private label securitization market returns.

Same here. Never heard it reported as anything but false and insane and out of touch, etc. Never once did I see it repeated as accurate. But I’ve seen it literally hundreds of times now, either being discredited or lampooned.

Less philosophical, but no less important, could be the fact that it’s all rather . . . fun.

And that’s the answer in a nutshell.

I was attending art school when the first Gulf War started. The response was immediate and prolific. Demonstrations and spontaneous art installations. Brokered talks between the few conservatives and the many leftists, as if they mattered. One northeastern lefty organized protests downtown (and notified the press, to get coverage) and was elated that Amy Carter, Jimmy Carter’s daughter, happened to be attending our school at the time. She loved having Amy Carter as a pinion for her super-meaningful protests.

Then hostilities stopped and the war was “over”. Were they happy? Were the excited? No, they were not. They were glum and depressed. Here was their Vietnam and it was already over! The injustice of it all!

The protests and demonstrations aren’t about changing anything, and certainly never about changing everything . . . once the protests are over, so is the party. It’s about virtue signally, moral self-licensing, and having a blast and patting each other on the back about how awesome they all are.

Hah! I remember when Reagan invaded Grenada and everyone at the People’s Republic of Madison were out protesting. I would wager 90% of the protesters had never even heard of Grenada before they started marching.

I remember when Reagan invaded Grenada and everyone at the People’s Republic of Madison were out protesting. I would wager 90% of the protesters had never even heard of Grenada before they started marching.

I was in ROTC at Michigan State, and we had to find a map.

Here was their Vietnam and it was already over! The injustice of it all!

Those 100-hour wars are hell on protesters. Barely enough time for the ink to dry on their signs!

Kevin, it’s also impressive that Trump has managed to do in one year what the entire Cold War couldn’t, namely turn the left against Russia. PL now sounds like McCain when it comes to Putin and Ukraine.

This could easily have been A101 a few short weeks ago:

“Trump: There are a lot of killers. We’ve got a lot of killers. What, you think our country’s so innocent?”

Hah! Eh, nobody likes to do it. I’ve conditioned myself to correct my mistakes as vociferously as I can (if I agree that I’m mistaken . . . aye, there’s the rub). Because if you messed up and fix it, nobody cares. Better not look like you’re trying to hide something.